1. You are producing and selling Good X. The income elasticity of demand for you
ID: 1138456 • Letter: 1
Question
1. You are producing and selling Good X. The income elasticity of demand for your product equals – 0.125 and the cross (Good Y) price elasticity of demand for your good is – 12.50. From this information, you determine that consumers consider your good to be a(n) ________ good, and they consider goods X and Y to be ___________ goods.
a) inferior; complementary c) normal; substitute
b) inferior; substitute d) normal; complementary
2. You are producing and selling Good X. The income elasticity of demand for your product equals – 0.125 and the cross (Good Y) price elasticity of demand for your good is – 12.50. From this information, you determine that consumers consider your good to be a(n) ________ good, and they consider goods X and Y to be ___________ goods.
a) inferior; complementary c) normal; substitute
b) inferior; substitute d) normal; complementary
. Annual percentage yields offered on U.S. Treasury Bills, Notes and Bonds on Friday, September 15, 2017 are shown in the table below. (answer 3-4)
Date
1 Mo
3 Mo
6 Mo
1 Yr
2 Yr
3 Yr
5 Yr
7 Yr
10 Yr
20 Yr
30 Yr
09/15/17
0.98
1.05
1.17
1.30
1.39
1.53
1.81
2.04
2.20
2.52
2.77
3. On this date a 6-month Treasury Bill promising to pay Par or Face Value of $100,000 sold at a price equal to ____ dollars.
a) 98,843.53 b) 98,902.67 c) 99,084.48 * d) 99,418.40 e) 99,562.25
4. If bond traders are risk neutral and the transactions costs of buying/selling bonds are negligible we can determine that traders expect the annual percentage yield offered on 1 year notes on September 11, 2019 will equal:
a) 1.30 b) 1.56 c) 1. 68 * d) 1.81 e) 1.92
Please explain the reason why you chose this answer.
Date
1 Mo
3 Mo
6 Mo
1 Yr
2 Yr
3 Yr
5 Yr
7 Yr
10 Yr
20 Yr
30 Yr
09/15/17
0.98
1.05
1.17
1.30
1.39
1.53
1.81
2.04
2.20
2.52
2.77
Explanation / Answer
Ans 1)
A negative income elasticity means as Income increases deomad for that good decreases hence this good is inferior similalrly as Cross Price elasticity is negative that means as Price of other good increases it decrease the demand of this good that means both goods are complementary
Option A is correct response
Ans 2)
This is repeated version of Q1) Hence answer is the same
Ans 3)
The value will be 100000/(1+(1.17%/2))=99418.4
Hence option D is correct
Ans 4)
It can be calculated as below
1.0153^2=(1.0139)*(1+r)
r=0.01679=1.68%
Hence option C is correct
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